President Volodymyr Zelenskyy has said he will
stay out of the legal battle waged by oligarch Ihor Kolomoisky to get back the bank
that he looted. In 2016, Ukraine nationalized PrivatBank, the largest
commercial bank in the country, that Kolomoisky co-owned at the time.

The president’s response is appropriate in a
country with an operating rule of law. Courts should remain independent from
politics. But in Ukraine, with an unreformed judiciary, this is a complete cop
out.

Zelenskyy, who is a lawyer himself, has said his priority is to “protect our country, only the interests of the state of Ukraine” and that interference is not appropriate at this point. “Honestly, I haven’t called any of the judges in my life yet. I haven’t talked to any of them on the phone, haven’t asked for anything … I have no right to influence. Let’s look at the result. If the result is such that I need to protect the country, I will protect our state,” he said.

It sounds great in the United States or
European Union, but political interference in corrupt courts does not abrogate
the rule of law. It upholds it. And given Zelenskyy’s enormous mandate for
reform by Ukrainians, extraordinary steps must, and can, be taken sooner rather
than later in the national interest.

Parliament should declare that any decision giving the bank back to Kolomoisky be declared null and void on grounds of “national interest.” Passage would not be difficult, given public sentiment and given the fact that Zelenskyy’s Servant of the People Party holds 254 of the 450 seats in parliament.

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A Kyiv-based lawyer suggested such legislation would be
“unconstitutional” because only courts can override another court. But how many
judges in Ukraine have contravened the constitution and has Kolomoisky or his
ilk ever concerned themselves with the law of the land?

Here’s the background and why the national
interest is at stake: The International Monetary Fund, chief benefactor of
Ukraine since 2014, is adamant that the 2016 nationalization of Kolomoisky’s
PrivatBank should not be reversed. The IMF pushed Ukraine to clean up its
entire banking system and PrivatBank was the largest by far. Some $5.5 billion
was missing from the bank and the Ukrainian government had to invest $6 billion
to protect Ukrainian depositors and keep it operating. Ukraine’s other
benefactors and lenders, agencies, and countries are also against handing this
bank back to Kolomoisky.

After Zelenskyy was elected, Kolomoisky
returned from exile to Ukraine and has been accused by Valeria Gontareva,
former chair of the National Bank of Ukraine, of perpetrating a string of
violent acts against her and her family this year. He denies this.

Kolomoisky won a decision this year, which
would nullify the nationalization, and the appeal is winding up this week or
next.

But on October 15, he lost a related case in a British appeals court involving a $1.9 billion fraud lawsuit brought by the National Bank of Ukraine and Ukraine’s Ministry of Finance against Kolomoisky and his partner Gennady Bogoliubov. The lawsuit claims that the two misappropriated bank funds by funneling loans through companies they controlled in the United Kingdom and elsewhere.

The British judges also re-imposed a $2.6 billion freezing order on the assets of the tycoons ahead of the trial. “This is an important step for achieving justice for the bank and Ukrainian people,” PrivatBank CEO Petr Krumphanzl said in a statement.

The decision about the Ukraine appeal is due this week or next and there are allegations that the appeal court judge is biased. The lawyers representing the National Bank of Ukraine and others have complained to the High Tribunal of Justice about this, the judge has been interviewed, but no decision has been reached as to whether there is malpractice involved.

The stakes couldn’t be higher.

“If the judge in this case rules against the state, she [the
judge] will be risking not only PrivatBank’s future, but the stability of the
rest of the banking sector and macro financial stability more generally,” wrote
Timothy Ash of Bluebay Asset Management. “And in this scenario, where the
ruling is against the state, Ukraine can forget about an IMF program and
backstop.”

If the National Bank of Ukraine loses that appeal, it stated six
months ago that restitution will occur. The state will withdraw the $6 billion
deposited to replace the stolen funds, direct it to depositors, declare the
bank insolvent, and ask the Ministry of Finance to nationalize it a second
time.

So, the question is would Zelenskyy support a second
nationalization?

“If re-nationalization is legally
difficult, it will have little choice but to make the bank insolvent,” wrote
Timothy Ash. “The state would still face the challenging task of managing the
insolvency of the biggest bank in the country which would likely impose huge
collateral risks to the sovereign balance sheet. I’m not sure Zelenskyy or the
judges have thought all this through.”

Clearly, the national interest
overrides all other considerations. The damage to the banking system, the
economy, the currency, and Ukraine’s reputation is very concerning if a crook
is allowed to game the country’s still-rotten courts.

This issue, President Zelenskyy, is
not about the rule of law. To hide behind that is unacceptable. Zelenskyy is
either a champion for all Ukrainians or he is the enabler to a reprehensible
oligarch.

Diane Francis is a Senior Fellow at the Atlantic
Council’s Eurasia Center, Editor at Large with the National Post in Canada, a
Distinguished Professor at Ryerson University’s Ted Rogers School of
Management, and author of ten books.

Zelenskyy is consolidating power. Ukraine is rapidly switching to a presidential republic from the parliamentary-presidential system its constitution prescribes. And the worst part is that there’s little to stop him.

The Eurasia Center’s mission is to enhance transatlantic cooperation in promoting stability, democratic values and prosperity in Eurasia, from Eastern Europe and Turkey in the West to the Caucasus, Russia and Central Asia in the East.

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